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Investment Advice For The Young Investor

One of the best ways to become financially secure is to start investing early in life. At the beginning of any career, the thought of earning more money is overwhelming. Most young Americans fail to see the need to start saving for a rainy day. They think about all the things they want to buy and trips they want to take. Don’t be one of those people who doesn’t put their wealth to work for them right away.

Statistics released from the Federal Reserve stated that more than 50% of all Americans, under the age of 30, have not set aside one penny for retirement. That means that there are millions of people that are missing out on the benefit of letting their interest compound. Interest that earns on top of interest is a great way to save for retirement. The interest-on-interest phenomenon can be worth tens of thousands of dollars. If a person invests about $300 a month from the time they are 40 until they are 65, and they earn a return of 6.5% on that money every year, at the age of 65, they would have more than $212,000. However, let’s consider that they started their savings at 25 instead of 40. Their bank account would now be over $630,000. At triple their original amount, it’s really something to think about!

Another problem that young investors get caught up in is trying to time the market just right. They want to get in when stocks are low and then get out when they’re high. Another problem is that they stop buying stocks at all when the market reaches a specific point. It is always a good time to buy stocks. Using the dollar-cost advertising principal the odds are in their favor. Essentially, investing a set amount over time and they will end up buying more shares when the prices are low and less when they are high. If there is a stock that a person likes and it’s trading for $40 today. The investor puts in $1,000, which gives them 25 shares. There is no way to know whether this stock will rise or fall. By using this formula called dollar-cost averaging, it allows you to collect stocks at favorable regular prices, while removing the sucker’s mission of trying to time the market just right.

The trick is to take it slow and make good decisions. If something sounds like a good idea today, it will also be a good idea tomorrow. Slow and steady wins the race. Saving for retirement is a lifelong process and not something that can be accomplished overnight.